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Bitcoin Bridged Trustlessly to L2; Ethereum’s Blob Mob

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Welcome to The Protocol, CoinDesk’s weekly wrap-up of the most important stories in cryptocurrency tech development. I’m Marc Hochstein, CoinDesk’s deputy editor-in-chief for features, opinion and standards.

IN THIS ISSUE:

  • Ethereum’s blob mob
  • Staking on Starknet
  • Avalanche’s big upgrade
  • L2 teams beam over Beam Chain
  • Sui suffers a brief outage
  • Bitcoin bridged, trustlessly

This article is featured in the latest issue of The Protocol, our weekly newsletter exploring the tech behind crypto, one block at a time. Sign up here to get it in your inbox every Wednesday. Also please check out our weekly The Protocol podcast.


Network news

BEAMING OVER THE BEAM CHAIN: What’s good for the L1 is good for the L2s. That’s the assessment the teams behind zkSync and Polygon, two of the leading layer-2 networks running on top of Ethereum, gave of Justin Drake’s proposal to overhaul the $400 billion blockchain, dismissing suggestions it would make their auxiliary networks redundant. “That’s really a misconception,” said Alex Gluchowski, the CEO of Matter Labs, the developer firm behind zkSync. “The changes that Justin announced are focused on the consensus layer, not on the execution layer. It’s not going to affect the execution layer.” In addition to incorporating ZK, Drake’s proposal seeks to shorten block times, which could cut transaction costs for L2s settling on Ethereum. Drake also said he wants to introduce single-slot finality, meaning blocks with transaction data could be finalized immediately, and that information would become permanent right away. “All of those things are great because we depend on Ethereum as the global settlement layer,” Gluchowski said. Brendan Farmer, a co-founder at Polygon, also told CoinDesk he doesn’t think the Beam Chain would obsolesce layer-2s. Instead, he said, the upgrade would “make rollups work better.” However, others in the crypto community were underwhelmed by the whole plan, lamenting in particular that Drake’s five-year timeline wasn’t ambitious enough, leaving ample room for centrally-developed chains like Solana to eat Ethereum’s lunch.” Read more

SUI OUTAGE: Sui Network (SUI), a relatively new blockchain, experienced an unexpected two-hour outage on Thursday. The downtime was caused by a bug in its transaction scheduling logic, which led to its validator network crashing. The issue was resolved, the network said. Blockchain outages can take place for a plethora of reasons, ranging from a 51% attack to technical errors. A common error is that of nodes – or individual entities that process transactions – being unable to sync with each other, causing the blockchain to go offline. Software bugs may be another error vector, where outdated code can render the network’s processes inoperable. Read more

STAKING ON STARKNET: Starknet has become the first major rollup blockchain running on top of Ethereum to let users earn money by staking their tokens and validating transactions. (Metis was the first layer-2 to do so but is far smaller and is an “optimium,” a different kind of L2.) Now, anyone who has at least 20,000 STRK tokens (roughly $12,000 at recent prices) can pledge the asset as collateral and earn rewards for validating transactions. Users with less than 20,000 STRK can delegate their tokens to validators to stake on their behalf. (Validators that behave maliciously or neglect their duties stand to forfeit staked tokens.) Validators and delegators that want to withdraw staked tokens must wait 21 days to receive them as well as any rewards earned from staking. Implementing staking on Starknet is part of a multiphase plan. During this first phase, StarkWare, the company developing Starknet will study staking habits on the network, and from there will assess whether and how its validators can be given the additional responsibilities of creating and “attesting,” or confirming, blocks in the protocol. Read more

AVALANCHE’S BIG UPGRADE: Avalanche, the eighth-largest blockchain by total value locked (TVL), is moving ahead with a major technical makeover. The Avalanche9000 upgrade went live in a test network environment Monday, bringing the changes one step closer to the main network. Avalanche9000 will be the largest upgrade that Avalanche has seen. It is designed to cut the costs of sending transactions, operating validators and building apps on the network, whose native token (AVAX) is the 11th-largest cryptocurrency, with a $16 billion market cap. The foundation is trying to attract developers to Avalanche and encourage users to create customized blockchains using its technology, known as subnets. Somewhat confusingly, subnets are now officially referred to in the Avalanche community as “L1s,” even though they are roughly analogous to the layer-2, or L2, networks that augment Ethereum and other blockchains. (Avalanche’s “primary network,” the equivalent of a layer-1 in other ecosystems, is considered a subnet.) The team is hoping to bring Avalanche9000 to mainnet by yearend. Among other changes, 9000 would allow for a new type of validator with which anyone can launch their own subnets. Read more

ONE-WAY TICKET: BitcoinOS, a smart contract project led by crypto O.G. Edan Yago, has executed what it bills as the first trustless bridge transaction for any blockchain. Using zero-knowledge cryptography, a nominal amount of bitcoin (0.0002 BTC, about $19 and change) was locked up on the main blockchain’s testnet, and a proof was generated minting tokens on the testnet for Merlin Chain, a layer-2 network. No oracle or custodian was involved, according to BitcoinOS. For now, however, Merlin Chain is like the Hotel California or a roach motel for the bridged BTC. “This is one half of the bridge showing the ability to bridge assets from Bitcoin to an EVM,” BitcoinOS said in a press release. “Once the other half of the bridge is completed, Merlin Chain users can settle their Bitcoin-pegged assets back to the mainchain by proving that the tokens were burned.”


Ethereum’s Blob Mob

Usage of binary large objects, or blobs, has surged on the Ethereum network, signaling that more users are embracing layer-2 scaling tech for faster and more affordable transactions.

This year, Ethereum’s Dencun upgrade introduced blobs, which allow large chunks of data to be temporarily attached to transactions, and later deleted after the data is verified. (You can think of a blob as a sidecar that rides along with a motorcycle for a time but eventually gets detached and discarded.) Layer-2 protocols such as BASE, Arbitrum, and Optimism use blobs to bundle transactions together, process them off-chain and then post them to the Ethereum main chain for verification without permanently gumming up the works.

The number of blobs posted to the network consistently averaged more than 21,000 this month, matching the record activity seen in March, according to pseudonymous data analyst Hildobby’s Dune Analytics dashboard.

Posting blobs costs a fee, which fluctuates depending on network conditions. The fees are paid in Ethereum’s native token ether, and are burned just like regular transaction fees, taking supply of ETH off the market, a positive for the coin’s price.

In this way, blobs mitigate the much-discussed cannibalization of the main chain by L2.

The blob base submission fee spiked as high as $80 on Monday, the highest since March, and the average number of blobs posted in each Ethereum block rose to 4.3. More importantly, blob fees have burned over 214 ETH worth $723,000 over the last seven days, the sixth largest source of fee burns on the network over that period, according to data from ultrasound.money.

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Solana price slowly forms a rare pattern: can SOL surge 270%?

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Solana’s price has come under pressure over the past two months amid growing concerns about its ecosystem.

Solana (SOL) has dropped from its year-to-date high of $295.52 to a low of $112 this week, wiping out $71 billion in market value as its market cap plunged from $139 billion to $68 billion.

Solana’s crash was because of the ongoing crypto crash that has brought the total market cap of the whole industry to $2.8 trillion.

The price drop has also been fueled by rising concerns about Solana’s ecosystem, which has become increasingly linked to meme coins. The market cap of all Solana meme coins tracked by CoinGecko has fallen from over $25 billion earlier this year to $7.7 billion. A key concern is that many of these meme coins have turned out to be rug-pull scams.

Another factor weighing on Solana’s price is a large token unlock that took place earlier this month, tied to recent FTX distributions. A token unlock introduces more tokens into circulation, leading to potential dilution and downward pressure on price.

Solana has also lost its market share in the DEX industry to Ethereum (ETH). According to DeFi Llama, the total volume handled by DEX protocols in the network in the last 30 days stood at $76.95 billion, lower than Ethereum’s $84 billion.

Solana price technical analysis

solana price
SOL price chart | Source: crypto.news

On the positive side, signs suggest that Solana could stage a strong comeback once the current crypto crash eases.

The weekly chart shows that the accumulation and distribution indicator has continued rising over the past few months, signaling that investors have been accumulating SOL during the downturn.

Most importantly, Solana has been forming a cup-and-handle pattern, a bullish formation characterized by a rounded bottom, a horizontal resistance line, and a pullback.

In Solana’s case, the horizontal line connects the highest levels from 2021 and 2024. The ongoing retreat represents the formation of the handle section. If Solana holds above $100, there’s a strong likelihood that it could stage a rally.

The cup has a depth of about 95%. Measuring that same distance from the top of the cup suggests an eventual surge to $505, implying a 270% increase from current levels.

The key caveat is that cup-and-handle patterns take time to complete, meaning that the 270% surge could take months or even years. For example, it took three years for the cup section to form.



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Story Protocol announces launch of public mainnet

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Story Protocol has officially launched its public mainnet following a six month long testnet.

Story Protocol, a layer-1 blockchain, has announced the launched its public mainnet, marking the first-ever global, programmable market for IP. The platform aims to transform the $61 trillion IP asset class by giving IP holders and AI-driven products the tools to manage, trade, and monetize creative assets.

Story Protocol’s launch follows a six-month testnet phase that began with the “Iliad” testnet on August 27, 2024. Now live, its mainnet provides a decentralized platform where IP owners can set up licensing rules and transact without any middlemen.

The network will be secured by the IP token. IP is used for transactions, governance, and creator rewards. IP owners can register and tokenize their work on the blockchain, setting rules for how it can be used, modified, or monetized. Developers can build apps on the network, creating new AI tools, licensing platforms, and IP marketplaces.

IP has debuted with an initial supply of 1 billion tokens. A 30-day rewards portal has been set up to allow testnet participants to claim IP tokens. Staking IP is an option for those who wish to promote network security. The staking phase for the IP, called “Singularity,” kicked off on Feb.1, but rewards will be distributed starting March 2. 

Story Protocol announces launch of public mainnet - 1
IP token distribution. Source: Story Protocol

Notably, tokens allocated to early backers and core contributors will be locked for one year. Major exchanges like Coinbase, OKX, KuCoin, Bybit, Bitget, and Bithumb have already announced the listing of IP.

Story Protocol raised $140 million from investors such as Samsung Next and a16z. Several IP-focused projects are already building on the network. Aria, one such project, raised $7 million to purchase the rights to Justin Bieber’s song “Peaches” and divide the proceeds among the IP asset’s fractional owners.



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Top cryptocurrencies to watch this week: Mantra, Optimism, Sui

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Some of the top cryptocurrencies to watch this week will be Mantra, Sui, and Optimism.

Why? The cryptocurrency market saw Mantra (OM) reach a new record high Sunday, while Optimism (OP) plans a $53 million token unlock. Sui (SUI), currently on a bearish trajectory, is set to unlock $138 million in tokens this week.

Read on for a more detailed look at the technicals and what the trajectory of each token shows.

Mantra: The top crypto project in the real-world asset (RWA) tokenization industry jumped to a record high of $5.08. That rebound was in line with our recent OM price prediction

Mantra soared because of the recent call by BlackRock’s CEO for regulators to approve the tokenization of stocks and bonds. It also reached a deal to tokenize DAMAC’s real estate projects in Dubai.

The daily chart reveals that the Mantra price has formed a bullish flag chart pattern, a popular continuation sign. This pattern comprises a long vertical line and a rectangle pattern, and is then followed by a bullish breakout. 

Mantra’s flag pole is at least 156% tall. As such, measuring the same distance from $4.53 means the coin is expected to rise to $11 in the long term. 

Mantra price
Mantra price chart | Source: crypto.news

Optimism: The third-biggest layer-2 network prepares to unlock tokens worth over $53 million or 1.48% of the float. It now has over 1.35 billion tokens in circulation against a total supply of 4.29 billion.

Optimism’s unlock comes when the token has been under pressure in the past few months. It has dropped to a low of $1.6295, down by 40.7% from its highest level in November. 

Optimism is hovering at the key support at $1.6076, where it failed to move below since Dec. 20. It has also formed a symmetrical triangle pattern. Therefore, a break below that level will likely point to more downside, potentially to $1.30, its lowest swing in November last year.

Optimism price
Optimism price chart | Source: crypto.news

Sui: Like Optimism, Sui will also have a big unlock worth $138 million or 1.1% of the float on Thursday. Only 37% of all SUI tokens have been unlocked, with the final one expected to happen in 2069.

Sui’s token unlock comes when it is in a technical bear market after falling 22% from its highest level this year. It has moved below the lower side of the ascending channel. 

The coin has moved below the 50-day moving average, while the Relative Strength Index and the MACD have continued falling. Therefore, the coin will likely continue falling, with the next point to watch being at $2.9415, its lowest point on Nov. 26.

Top cryptocurrencies to watch this week: Mantra, Optimism, Sui - 1
Sui price chart | Source: crypto.news

The other top coins to watch this week will be Pi Network, Ethereum, and dYdX.

Pi Network’s know-your-customer verification deadline will end on Jan. 31. Ethereum will be in the spotlight as the market watches the controversy with the Ethereum Foundation.

DYdX will unlock tokens worth $9.6 million on Wednesday.



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